I got asked a question yesterday: “Does NPB have access to off-market properties?”
Well, this has to be one of the most common questions that a buyers advocate gets asked so I was not surprised at the question.
What I was surprised at was the tone of astonishment that the prospective buyer displayed when I shared my thoughts about this with them. Given that astonishment, it’s evident that there are buyers advocates around that emphasize the importance of off-market properties and how they buy “over 70% of their deals” this way.
So, let me take a little time to express my views on this but first, I’d like to ask you:
If you were about to sell your property, would you want it exposed to one individual buyer or would you want it to reach 20-30 groups of qualified, finance-approved home buyers? And remember, this larger group would also likely include the aforementioned individual buyers…
Let’s take a moment and examine this process a little closer.
Potential Reasons for an Off-Market Sale
Now, I agree that at times there are genuine reasons why some sellers request that their sales agent make an off-market sale:
- Privacy is a major concern as they don’t want the neighbours or other family members knowing until the actual sale happens,
- Financial pressure which has created the need for a quick sale,
- Divorce, death or change in personal circumstances,
- Nervousness or anxiety about auctions or crowds of potential buyers tramping through their property,
- Saving on agency marketing and advertising cost.
Whilst I believe these to be counterproductive, they are reasons nonetheless and have to be duly considered. But these reasons aside, what does it mean when a sales agent tells you they have an off-market property for you in the first place?
Examining Off-Market Properties
Let me explain it like this.
NPB Brisbane comes across two types of what I call “off-market” transactions: pre-market properties and off-market properties.
Most of our opportunities are really pre-market properties, where we get the opportunity to inspect and make an offer on a property before it hits the Internet and the general public.
And then there are the aforementioned off-market properties where, for whatever reason, the vendor doesn’t want to make the sale of their property public knowledge.
So how do they generally work and why would a sales agent want to sell properties this way?
How Off-Market Properties Work
It works a bit like this… When a selling agent lists a new property for sale, there’s actually about a week before it’s ready to launch on the Internet.
During this first week, the sales agent has a number of tasks to complete to prepare for the public launch of the listing to the online portals:
- Photographs need to be scheduled.
- The staging of the property has to be coordinated.
- Floor plans need to be drawn.
- The marketing spiel has to be written and approved by the vendor
Another internal factor at this point is that the sales agent is thinking about the dollar value and the distribution of the sales commissions within the office.
You see… most selling agents would prefer to keep the entire sales commissions for themselves rather than sharing it with other agents in their office.
So what do they do?
Well…they don’t let the other sales agents in their office know about the property for a few days. Instead, on the 1st day, they call their personal “A grade” buyers and offer them the opportunity to purchase this great new property they’ve just listed for sale.
If this doesn’t generate any positive interest for them, then they’re calling their “B Grade” buyers. After the first few days, it then becomes the time to announce the property to the other sales agents in their office and then these agents do the same.
And if it doesn’t sell after this first week, then the property gets listed on the Internet and then YOU find out about it.
So, how do you get on the speed dial of these sales agents?
How to Become an “A Grade” Buyer
I’ve been a trusted buyers agent for over 17 years now and in that time, I have cultivated a database of sales agents who know the value of my clients through the deals we have done together historically.
Last month alone we bought four properties PRE-market (meaning no one else knew about them) and a significant portion of the properties we buy for clients are bought this way.
During your lifetime, you’ll probably only ever deal with sales agents no more than two or three times maximum, so it’s tough to know what to do when you are a novice property investor or first-time home buyer.
Whereas the NPB Brisbane team was involved in over 80 property transactions last financial year alone. So, it`s assured that we are on the speed dial of most selling agents in the areas where we are active around the Brisbane markets.
This is a relationship that all of our clients benefit from – our TIME and EXPERIENCE in the marketplace.
Then there is an alternate reality… As I’ve already stated, we buy a lot of client properties
pre-market but on the other side of the coin, we liken ourselves to the “John West” of buyers advocates. In other words, we’re known for the properties that we REJECT!
The truth is…
Most off-market properties aren’t great deals at all!
Why Off-Market Properties Are Rarely Worth It
What typically happens with off-market properties is that the prospective vendor will call in 2-3 sales agents to provide their opinions on the sales price they believe that they will achieve.
Whilst the seasoned agent will demonstrate their quality in other ways, the not-so-seasoned agent will suggest and emphasize a sales price that is not what would usually have been considered.
They’re doing what is known in the industry as “buying the listing”. In other words, they entice the seller with an inflated price to get the listing and then slowly use the process to condition the vendor downwards to reach the real market price.
Since we’re on this sales agent’s “A Grade” buyer list, we are made aware of this opportunity but when we are informed about the sales agent’s price expectations, we pass on it with the note to the sales agent that it was not suitable for us.
But that’s okay… that’s what we do for our clients.
What is also often a contributing factor to our rejection of most off-market properties is that when we spend the time to perform our desktop analysis on each opportunity, we find some irregularities with the property that do not quite cut it for us.
Yes, we do set a high standard for our clients’ properties we purchase, so if they do not satisfy the preliminary tick boxes, we don’t move along the process any further.
Again, we are made aware of this opportunity because we are on this sales agent’s “A Grade” buyer list but we pass with the note to the sales agent that it was not suitable for us, and again that’s okay because that’s what we do for our clients.
You see… the reality is that even if 20 properties are listed online every day in areas that we are actively looking in for our clients, it’s likely that very few are what NPB Brisbane considers as “OUR” grade.
In fact, out of every 20 properties that we see online, we would probably qualify only 2 or 3 as suitably qualified properties for our clients.
So, when I was explaining this to the enquirer yesterday who asked the original question, they hopefully began to see my point that off-market properties are typically either “well overpriced” or “underpinned with some type of irregularities” and that they should not engage with a buyer’s advocate who bought over 70% of their clients’ properties this way.
Find pre-market properties (not off-market properties) with the help of our buyers agents at National Property Buyers Brisbane and get the best Brisbane property market news straight to your inbox when you sign up for our newsletter today!